HPI eyes Woolworths pubs after $18.1m Brisbane buy

Listed pub and bottleshop owner
Hotel Property Investments
is eyeing off pubs being offloaded by the
Woolworths
-controlled
ALH Group
after making its first acquisition since floating in December last year.

HPI paid $18.1 million for Hotel HQ in Underwood, south-east Brisbane, on a net yield of 7.23 per cent.

The acquisition takes the value of HPI’s portfolio to almost $500 million and now comprises 42 pubs and seven detached bottle stores, all leased to Coles.

HPI fund manager David Charles told The Australian Financial Review the group was interested in acquiring pubs being offloaded by the ALH Group, which is 75 per cent owned by Woolworths, with the remainder controlled by billionaire pub baron
Bruce Mathieson
.

Woolworths is weighing up whether it will unload about $650 million worth of pubs and liquor stores through a sale to a trade buyer or by going down the route of a sharemarket listing.

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ALE Property Group
, the biggest listed pub landlord in the country, is also looking to expand its portfolio after posting solid 2014 annual results and a 5 per cent rise in the value of its $822 million portfolio.

“The pub market is quite buoyant at the moment," Mr Charles said.

“There are always assets up for sale. We get calls from all the major pub brokers in the country."

Conservative approach

Mr Charles said the board took a conservative approach and would only acquire assets that met its investment approach.

HPI targets properties that are “in good condition, in key regional or metropolitan locations with potential for long-term growth, and leased to experienced tenants on favourable lease terms".

“The pub freehold sector is presently active and HPI will continue to monitor the market for acquisition opportunities that provide value and benefit to security holders," the pub group said.

Hotel HQ is leased to
Coles
on an initial term of 13.5 years with renewal options available. “Hotel HQ is a fantastic asset; it’s a new pub in a great location and Coles are a greater operator," Mr Charles said.

The pub was acquired from an unlisted fund set up by Queensland fund manager Harvest Property Group and investment banker Trevor Loewensohn’s Alceon group. The fund acquired it and an adjoining retail complex for $29.5 million in November 2012.

The sale of Hotel HQ was brokered by Michael Gross of Gross Waddell alongside the Stonebridge Property Group. The acquisition will be funded from available capacity in HPI’s loan facility.

HPI is chaired by Mike Tilley, a former chief executive of the Challenger financial ­services group. Other directors include Foster’s Group chief executive Trevor O’Hoy and former Tatts Group chief financial officer Ray Gunston.